Opinion - Its crystal clear that value rises with weight (but not linearly)

The previous article highlighted the importance of irregularities and how they impact the value of a diamond. Irregularities, together with carat, clarity and color, are the basic components that determine a diamond’s value.

Of the different basic characteristics of a diamond, carat is probably the easiest to understand. Carat is the common unit for measuring the weight of diamonds. One carat is equal to one-fifth of a gram or 0.0071 ounces.

The value of a diamond is commonly expressed per carat. So if the value of a diamond is X per carat, and the diamond weighs half a carat, than the diamond’s value is half of X. Also, as a standard, a diamond's total weight is always noted to a hundredth of a carat - 1.23 carats, for example.

It would seem that the value of a diamond would rise in direct correlation with its weight. However, as part of the Crystal Clear philosophy, it is important to note that value does not increase in proportion to weight.

One of the reasons for this indirect correlation has to do with rarity. Diamonds are a rare creation of nature. Imagine the great pressures needed to form a diamond and the depths in which this process takes place, and it is not surprising that diamonds break. Half of mined diamonds are smaller than 0.10 carats in their rough form, another 45% are 0.10-2.00 carats and only 5% of all mined diamonds are two carats or large, according to a Bain & Co. research.

Because of this scale of rarity, the value of rough diamonds is higher as diamonds are bigger and diamonds polished from two carats or larger are especially higher value because of their extreme rarity.

Industry Terminology for sizes

In the diamond industry, there is a host of terms used to describe diamond weight ranges instead of simply stating the weight. A couple of these terms have historic backgrounds. Sources indicate that Carat comes from the use of carob seeds to weigh gems in ancient times.

Another common term is “Grainer,” which means a quarter of a carat. The source of this term is less established, though it is believed to come from the use of rice grains in weighing gems, mostly in the Far East. Grainers are written as fractions of four – ¼ grainers or ¼ grs. The use of grainer is so common in the diamond industry that it is used for halves (2/4 grs); three grainers means three quarters of a carat (3/4 grs) a carat (4/4 grs) and a carat and a half (6/4 grs).

Other common terms include “Stars” for 0.01-0.03-carat round diamonds; “Melee,” or “Melees” for diamonds weighing 0.08-0.14 cts; and “Pointers” refers to anything smaller than a carat because they are always zero point something.

Value “Stepping” Points

Instead of a linear increase, the value of diamonds increases more sharply at certain weight points, and because of that sizes are usually grouped into ranges (see the table below).The value of a diamond usually jumps dramatically at round carats. That means the per carat value of a diamond weighing one carat is much higher than a diamond weighing 0.99 carats, even if all other value parameters are equal. Therefore, the value difference between a one-carat diamond and a 0.99-carat diamond will be considerably greater than the difference between 0.99 carats and 0.98 carats.

The following is a list of common size-range value ranges as measured in carats:

0.01-0.03

0.04-0.07

0.08-0.14

0.15-0.17

0.18-0.23

0.23-0.29

0.30-0.39

0.40-0.45

0.46-0.49

0.50-0.69

0.70-0.89

0.90-0.99

1.00-1.19

1.20-1.29

1.30-1.49

1.50-1.69

1.70-1.99

2.00-2.99

Above two carats, the value changes at every round size.

This begs the question - how big are these value jumps? Based on analysis of round D color IF clarity diamonds currently trading in the market, the value steps are as listed in the following table. The percentage represents the added value of the weight bracket compared to the weight bracket just before it (one range lighter in weight):

Diamond Size

(In carats)

% Change

Diameter

(in millimeters)

Industry Terms

0.01-0.03

-

0.002-0.022

Stars

0.04-0.07

-13%*

0.023-2.70

0.08-0.14

22%

2.70-3.35

Melee

0.15-0.17

27%

3.35-3.60

6 Per Carat

0.18-0.23

12%

3.60-3.90

5 Per Carat

0.23-0.29

69%

3.90-4.25

Quarters

0.30-0.39

32%

4.25-4.70

Thirds

0.40-0.45

23%

4.70-4.95

Three Eights

0.46-0.49

16%

4.95-5.10

Light Halves

0.50-0.69

56%

5.10-5.65

Halves

0.70-0.89

44%

5.65-6.10

3 Grainers

0.90-0.99

26%

6.10-6.40

1.00-1.19

52%

6.40-6.75

Carats

1.20-1.29

3%

6.75-7.00

Five Grainers

1.30-1.49

4%

7.00-7.25

Five Grainers

1.50-1.69

16%

7.25-7.60

6 Grainers

1.70-1.99

3%

7.60-8.00

7 Grainers

2.00-2.99

61%

8.00-9.10

3.00-3.99

96%

9.10-10.30

4.00-4.99

15%

10.30-11.05

5.00-5.99

44%

11.05-11.55

6.00-6.99

0%

11.55-12.20

7.00-7.99

7%

12.20-12.80

8.00-8.99

5%

12.80-13.20

9.00-9.99

7%

13.20-13.80

10.00-12.99

16%

13.80-15.00

13.00-14.99

4%

15.00-15.80

15.00-17.99

6%

15.80-16.80

18.00-19.99

4%

16.80-17.25

20.00-24.99

4%

17.25-19.00

25.00-29.99

5%

19.00 -21.00

*Prices of 0.04-0.07 carat are discounted against the smaller goods because 0.01-0.03 carats are in high demand and low availability.

It must be stated that the value steps shown above are a reflection of today’s market. In a future article, the effect of demand will be discussed. For now, please keep in mind that the exact step may change a bit over time as some sizes become more in demand while demand for other size ranges temporarily soften.

As the graph above shows, the first major step in value is at 1.00-carats. The next is at 2.00 carats, an increase of more than 50% in both cases, based on the current market. The graph is based on wholesale polished diamond prices.

The large value step at 2.00 carats is due to it being a round size. Diamonds weighing 2.00 carats or more are considered by most traders as "large" diamonds.

While the above is considered a rule of thumb, there are small value variations within size ranges, particularly at two specific instances. The first is among diamonds larger than 2.00 carats and among smaller diamonds. In both cases, larger goods in the size range (i.e. 2.50-2.99 carat) are pricier per carat by a few percentage points than the smaller goods in the same size range.

Among the smaller goods, this is especially true in size ranges that include a round size. The 0.18-0.22 carat size range, for example, includes diamonds weighing 0.20 carats. In this size range, diamonds weighing 0.20-0.22 carats get a slightly better value per carat.

The second exception is among diamonds weighing 2.00 carats or more. Diamonds in the upper half of the weight have a higher value per carat than those in the lower half.

Another trend seen in terms of size and value is a considerable premium placed on "overweight" diamonds. If the weight of a diamond is just shy of a round weight, for example between 1.90 carats and 1.99 carats, it looks very much like the full weight. This will give a diamond a certain premium compared to a somewhat smaller diamond that weighs 1.50 carat.

It is important to pay attention to this information when buying a diamond because when comparing diamonds that otherwise have the same characteristics (color, clarity, cut and irregularities), there may be either a big or a small difference in value between diamonds with weight differences of as little as 0.01 carats. Amongst traders, this added information is taken into account when negotiating a transaction.

The intention here is not to provide an exhaustive list of all weight issues as they relate to value. At this point, the idea is to pull the veil back on the existence of this information. When buying a diamond, being aware of this information brings us a step closer to making a well-rounded decision, which is the goal of the Crystal Clear philosophy.